Looks like part of your core system file is corrupted. These really is no way of "repairing" this problem.
Wait!!! I tried running this file, it doesn't exist. I have never seen that file extension before... Windows.0???
Hmmm, either the file is really corrupted, or it is a Virus/Worm. Most likely a virus masking as a file. Either way, there is only really one solution. Back up all your important documents, format the Hardrive, and reinstall WindowsXP.
Sorry I can't help you anymore then that. Maybe a Windows "fanboy" could help you. I don't like Windows that much, so my knowledge is limited. What I would do is probably what half the other people on here are going to say:
FORMAT, REINSTALL, MOVE ON
That is the way Windows works, and it suks because of that. Hopefully Longhorn will Fix this with "regeneration"
BTW again, i noticed that it says 16bit in the error. This is a sure sign that that is a virus, being that simple viruses like that are 16bit, or the virus wasn't transferred correctly, so it is now 16bit, and won't run (thank god) Either way , FORMAT IT BABY!!!